When Are Counterfeit Goods Not Counterfeit Goods?

The Court of Justice of the European Union (CJEU) has recently given a preliminary ruling in Joined Cases C-446/09 and C-495/09 Koninklijke Philips Electronics NV v Lucheng Meijing Industrial Company Limited and others and Nokia Corporation v Her Majesty’s Commissioners of Revenue and Customs, INTA intervening.

The references relate to counterfeit goods in transit through the EU and the extent to which these may be detained by customs authorities. The CJEU confirmed in its decision that goods in transit can only be classified as counterfeit where it is shown that the goods are intended to be put on the market in the EU.

The references from the English and Belgian courts

The Philips case concerned a shipment of electric shavers from China which was intercepted by Belgian customs authorities. The Nokia case concerned a consignment of counterfeit mobile telephones and accessories from Hong Kong which were ultimately destined for Colombia. The goods were inspected at London Heathrow Airport but HMRC refused to detain the goods on the basis that they were in transit and there was no evidence that the goods would be diverted onto the EU market. Consequently HMRC considered that they did not qualify as counterfeit goods under the relevant customs regulations.

The English and Belgian courts referred a number of questions to the CJEU which essentially sought to establish whether goods in transit could be categorised as counterfeit goods for the purpose of the customs regulations in situations where there was no evidence to suggest that the goods were intended to be put on the market in the EU.

The decision of the CJEU

The CJEU confirmed that goods in transit could not be classified as ‘counterfeit’ goods within the meaning of the customs regulations merely because they had been brought into the EU, in the absence of evidence of an intention to put the goods on the market. The Court did, however, confirm that customs authorities may detain infringing goods as soon as they have grounds for suspecting that the goods are likely to be diverted onto the EU market. Examples of such grounds may include:

Evidence of a ‘commercial act’ in relation to the goods, such as offering the goods for sale or advertising them;

Documentation or correspondence suggesting that the goods are likely to be placed on the EU market;

The fact that the destination of the goods has not been declared;

Lack of information as to the identity of the manufacturer;

Lack of cooperation with the customs authorities.

Throughout the decision, the Court referred to the principle of free movement of goods and the fact that goods which infringed intellectual property rights in the EU would not necessarily infringe intellectual property rights in the countries of origin or destination.

The Court also reiterated that it was possible to hold goods under other EU legislation, for example, on product safety grounds.

Ultimately, rightholders are likely to be disappointed with this decision. Whilst reform of the customs regulations is currently proposed, the reforms are not aimed at the issue of counterfeit goods in transit across the EU. Accordingly, it will remain important that the issue of counterfeits is dealt with at all levels of production, including at source and at final destination, for the foreseeable future.

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